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Best intentions lay a perilous path - arbitrator as mediator

The uniform Commercial Arbitration legislation (CAA) allows an arbitrator to take on the role of mediator, but as Ku-ring-gai Council v Ichor Constructions Pty Ltd [2018] NSWSC 610 demonstrates, it is a perilous path that requires careful consideration and management by all parties.

Twelve days into the hearing of a dispute between the Council and Ichor, the arbitrator asked in an off the record discussion if the parties would consent to him putting forward a settlement proposal. They did, and a written consent for that to happen was signed on behalf of the parties. The arbitrator's proposal was presented, but rejected, and the conduct of the arbitration resumed. On the final day of the hearing, Ichor challenged the mandate of the arbitrator to have continued with the arbitration. It asserted that the written consent of the parties for the arbitrator to continue had not been obtained as required by section 27D(4) of the CAA, with the result that the arbitrator's appointment terminated by operation of section 27D(6).

The Council commenced court proceedings seeking orders that the arbitrator was entitled to proceed:

Council submitted the arbitrator had not acted as a "mediator" and that what transpired did not constitute "mediation proceedings" under section 27D(4) (which would dispense with the need for written consent under that provision). McDougall J noted the CAA should be construed in a manner that promotes "simplicity and certainty of operation" and that the interpretation advanced by Council did not support such a construction. As what ensued was "non-arbitral in character", His Honour held the arbitrator had in fact acted as a mediator.

Was express written consent under section 27D(4) to the resumption of the arbitration required? Ichor argued that it was, whilst Council asserted the requisite consent could be inferred from the written transcript of the proceedings recording submissions made by the parties after the arbitration resumed. Citing once more the aim of promoting certainty in construing the CAA, His Honour referred to various provisions that allow parties to agree on something other than the default position prescribed in those provisions, for instance by the inclusion of such caveats as "unless otherwise agreed" or "are free to agree". His Honour noted that section 27D was not such a provision, that it required the consents under sections 27D(1) and (4) to be "embodied in the written consent of each party", and rejected Council's proposition that consent could be inferred.

So what's the take-out? In the fast-paced and often unpredictable conduct of arbitral proceedings, don't lose sight of the formal requirements of the CAA.